Make owning a home more affordable in 2024
Earning rental income can be a game-changer for making homeownership more affordable in 2024. As we gear up for the New Year, consider the financial benefits of turning your home into an income-producing opportunity. Let’s delve into the basics and nuances of this smart homeownership strategy.
The Basics: Unlock Affordability Through Rental Income
Reflecting on the past, buying a home was more budget-friendly, but times have changed. Whether you’re a potential homebuyer or already own a home, generating rental income can be a savvy financial move. This approach not only helps cover various costs (mortgage interest, property taxes, insurance, etc.) but also enhances your chances of qualifying for a mortgage.
Renting out part of your residence need not jeopardize your principal residence exemption (PRE), allowing you to sell the property tax-free in the future. To maintain PRE eligibility, ensure that the rental activity is ancillary to the main use of the property and avoids structural changes that may trigger tax implications.
The Nuances: Tips for Smart Homeownership
Here are additional tips to navigate the complexities of homeownership:
Start Small: Begin your homeownership journey with a more affordable property, gradually building equity and upgrading over time.
Financial Planning Maintain a credit score above 680, save for the minimum down payment, and explore tax-sheltered plans like the First Home Savings Account (FHSA)[^2^].
Location Matters Explore properties outside major cities for affordability and consider moving away from big cities if needed.
Mortgage Guidance: Collaborate with a trusted mortgage broker for financing insights. Preapproval and understanding your financial capacity are crucial steps.
Avoid Private Lenders: Discourage borrowing from private lenders and opt for reputable institutions like major banks, trust companies, or credit unions for your mortgage needs.
Empower your homeownership journey by strategically integrating rental income into your financial plan. With careful planning, you can enhance your ability to afford a home or make your existing homeownership more sustainable.
Source: Times Colonist